International Trade and Cultural Identity

32 Pages Posted: 26 Apr 2004 Last revised: 29 Jun 2010

See all articles by Eckhard Janeba

Eckhard Janeba

University of Mannheim - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: April 2004

Abstract

Economists emphasize the benefits from free trade due to international specialization, but typically have a narrow measure of what matters to individuals. Critics of free trade, by contrast, focus on the pattern of consumption in society and the nature of goods being consumed, but often fail to take into account the gains from specialization. This paper develops a new framework to study the effects of trade liberalization on cultural identity, which emerges as the result of the interaction of individual consumption choices, similar to a network externality. In a Ricardian model of international trade the paper shows that (i) trade is not Pareto inferior to autarky if the free trade equilibrium is unique, (ii) trade is not Pareto superior to autarky if the world is culturally diverse under free trade, but can be if the world is culturally homogenous, (iii) and when multiple free trade equilibria exist everybody in a country can lose from free trade if that country is culturally homogenous under autarky. Consumers of imported cultural goods tend to gain, while consumers of exported cultural goods tend to lose from trade liberalization.

Suggested Citation

Janeba, Eckhard, International Trade and Cultural Identity (April 2004). NBER Working Paper No. w10426. Available at SSRN: https://ssrn.com/abstract=529006

Eckhard Janeba (Contact Author)

University of Mannheim - Department of Economics ( email )

L7, 3-5
D-68131 Mannheim
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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